President Obama gave homeowners some hope when he announced a one year moratorium on home foreclosures while he negotiated with the greedy bankers late last year.
But yesterdays announcement of a new $25 billion dollar settlement with the banks over fraudulent home foreclosures may result in homeowners losing their homes immediately.
Come on, did you really think President Obama was going to bail out homeowners the way he bailed out the bankers?
According to Bloomberg.com, the new settlement will result in an increase in home seizures that will inflict “short-term pain on delinquent U.S. borrowers while making a long-term housing recovery more likely.”
“With yesterday’s agreement,” Bloomberg notes, “banks are likely to resume property seizures.”
“All of this will result in more foreclosure pain in the short term as some of the foreclosures that should have happened last year instead happen this year,” wrote Daren Blomquist, a RealtyTrac vice president, in an e-mail to Bloomberg.com.
This is bad news for all of those investors who snapped up foreclosed homes hoping for a cash windfall when they flipped them.
Banks are expected to renew home seizures immediately to offset the cost of the new deal. The surge in home seizures by the banks will drive down home values due to the increase in empty homes in neighborhoods.
According to Bloomberg, $17 billion of the money will go to writing down debt for about 1 million homeowners through mortgage forgiveness, forbearance or loan modification programs.
“About 750,000 borrowers may get direct payments of as much as $2,000 to compensate them for servicing errors.”
The new deal doesn’t include loans owned or guaranteed by Fannie Mae (FNMA), Freddie Mac or Ginnie Mae.
Home foreclosures fell 46% in December from October 2010, when the banks began negotiations with the feds.
